Lumber Liquidators 2009 Annual Report Download - page 52

Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share data and per share amounts)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Lumber Liquidators Holdings, Inc. (formerly Lumber Liquidators, Inc.) (the “Company”) is a multi-channel specialty
retailer of hardwood flooring, and hardwood flooring enhancements and accessories, operating as a single business segment.
The Company offers an extensive assortment of exotic and domestic hardwood species, engineered hardwoods and laminates
direct to the consumer. The Company also features the renewable flooring products, bamboo and cork, and provides a wide
selection of flooring enhancements and accessories, including moldings, noise-reducing underlay and adhesives. These
products are primarily sold under the Company’s private label brands, including the premium Bellawood brand floors. The
Company sells primarily to homeowners or to contractors on behalf of homeowners through a network of 186 store locations
in primary or secondary metropolitan areas in 45 states at December 31, 2009. In addition to the store locations, the
Company’s products may be ordered, and customer questions/concerns addressed, through both the call center in Toano,
Virginia, and the website, www.lumberliquidators.com. The Company finishes the majority of the Bellawood products on its
finishing line in Toano, Virginia, which along with the call center, corporate offices, and distribution center, represent the
“Corporate Headquarters.”
Organization and Basis of Financial Statement Presentation
Lumber Liquidators, Inc. (“LLI”) was organized in 1994 as a Massachusetts corporation, and in August 2007, LLI was
reincorporated in Delaware. In November 2007, LLI completed its offering of 3,800,000 shares of common stock in an initial
public offering at a per share price of $11.00, receiving net proceeds of approximately $36,150 (the “IPO”). The founder and
current chairman of the Board (the “Founder”) and a private investment group sold an additional 6,200,000 shares of
common stock in the IPO.
LLI reorganized effective December 31, 2009, creating a new holding company structure, and as a result, a new parent
company named Lumber Liquidators Holdings, Inc. was formed. Outstanding shares of the common stock of the former
parent company, which was named Lumber Liquidators, Inc., were automatically converted, on a share for share basis, into
identical shares of common stock of the new holding company.
The consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, Lumber
Liquidators, Inc., Lumber Liquidators Services, LLC, and Lumber Liquidators Leasing, LLC. All significant intercompany
transactions have been eliminated in consolidation. The Company has evaluated all subsequent events through February 18,
2010, the date the consolidated financial statements were issued.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity date of three months or less when purchased to be
cash equivalents. The Company had cash equivalents of $27,022 and $30,952 at December 31, 2009 and 2008, respectively.
The Company accepts a range of debit and credit cards, and these transactions are generally transmitted to a bank for
reimbursement within 24 hours. The payments due from the banks for these debit and credit card transactions are generally
received, or settle, within 24-48 hours of the transmission date. The Company considers all debit and credit card transactions
that settle in less than seven days to be cash and cash equivalents. Amounts due from the banks for these transactions
classified as cash and cash equivalents totaled $3,227 and $2,889 at December 31, 2009 and 2008, respectively.
Credit Programs
Credit is offered to the Company’s customers through a proprietary credit card, the Lumber Liquidators credit card,
underwritten by third party financial institutions and at no recourse to the Company. In October 2009, the Company entered
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